Correlation Between Deere and Marijuana Company

Can any of the company-specific risk be diversified away by investing in both Deere and Marijuana Company at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Deere and Marijuana Company into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Deere Company and Marijuana, you can compare the effects of market volatilities on Deere and Marijuana Company and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Deere with a short position of Marijuana Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deere and Marijuana Company.

Diversification Opportunities for Deere and Marijuana Company

0.0

Correlation Coefficient

Deere  Marijuana Company

Pay attention - limited upside

The 3 months correlation between Deere and Marijuana is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Deere Company and Marijuana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marijuana Company and Deere is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Deere Company are associated (or correlated) with Marijuana Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marijuana Company has no effect on the direction of Deere i.e., Deere and Marijuana Company go up and down completely randomly.

Pair Corralation between Deere and Marijuana Company

If you would invest  41,818  in Deere Company on December 3, 2024 and sell it today you would earn a total of  6,261  from holding Deere Company or generate 14.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	97.5%
Values	Daily Returns

Deere Company  vs.  Marijuana

Deere Company

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Deere Company are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Deere is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Marijuana Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days Marijuana has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Marijuana Company is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Deere and Marijuana Company

The main advantage of trading using opposite Deere and Marijuana Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deere position performs unexpectedly, Marijuana Company can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Marijuana Company will offset losses from the drop in Marijuana Company's long position.

The idea behind Deere Company and Marijuana pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.